SBA Halts Minorities' Aid Program

By John M. GoshkoBy John M. GoshkoJuly 9, 1977

The head of the Small Business Administration, admitting that whites have reaped millions from a federal program to aid minority businessmen, yesterday halted the program until it can be overhauled to prevent further abuses.

SBA Administrator A. Vernon Weaver took this step as a Senate sub - committee heard two SBA officials testify that the Nixon administration had used the so - called 8(a) political instrument to enhance its image with blacks.

One witness, Leonard Cole, said that Donald F. Dunlap, overseer of the program during the early 1970s, was a political appointee who reportedly had been placed in the SBA at the order of Harry S. Dent, a political strategist on the Nixon White House staff.

Cole charged that Dunlap 'was very actively involved in carrying out his mission in the program - to follow the feelings of Mr. Harry Dent to take as much advantage politically of the program as it was possible to take.'

In a telephone interview, Dent, who now practices law in Columbia, S. C., insisted Cole's charge was 'untrue.' Dent said he knew Dunlap only slightly and had never been involved with the 8(a) program during his service at the White House.

These developments climaxed three days of hearings on the program by Lawton Chiles' (D - Fla.) Senate Government Operations spending sub - committee. The 8(a) program takes roughly $300 million a year in federal contracting out of competitive bidding and gives the SBA discretionary power to award the work to businesses owned by 'the economically and socially disadvantaged' to help them become established.

The SBA says that approximately 1,000 firms currently are performing 2,106 contracts with a combined value of $369 million. Most of these firms are engaged in construction or the providing of janitorial, food and security services at government installations.

However, Chiles heard a parade of witnesses who described case after case of loan and contracts intended for the 'disadvantaged' going to wealthy persons of white entrepreneurs cashing in on the program through their control of firms headed by black fronts and of persons getting contracts through political connections or personal relationships with SBA officials.

These revealations prompted Weaver. President Carter's appointee who took office April 1, to appear before the subcommittee yesterday and admit 'that the program has been abused to the benefit of unscrupulous businessmen.' He added: 'I assure you that the necessary changes will be made to put the program on a sound basis.'

Weaver said he was acting immediately to discontinue certification of new firms for the program until the SBA completes an evaluation of all the firms now holding 8(a) contracts.

In the future, Weaver said, the SBA will ban the use of 'sponsorships' - minority firms contracting with established white companies for technical assistance, management advice and help in obtaining financing and bonding. The system has been used by many white companies to control the firms under their sponsorship.

Weaver added that all existing contractual arranagements between white and minority firms will be renegotiated to taking excessive profits. He said the SBA also will insist that 8(a) firms legitimately owned and controlled by independent minority owners rather than fronts placed in phony ownership positions.

Finally, Weaver said, the SBA will try to establish 'specific criteria' governing who is eligible for the program, when a firm should be thrown out of the program for failure to meet its objectives and when a firm can be considered able to stand on its own feel without government help.

Weaver was preceded by two SBA officials - Cole and Raymond Harshman - who charged that the program became bound up in partisan political considerations during the time it was under Dunlap's direction.

Dunlap resigned from the SBA after a 1972 internal investigation by the agency determined that he had improperly tried to obtain a 48 per cent interest in a North Carolina 8(a) firm that was actually a front company for a white holding group.

Testimony at the Chiles hearings has included several references to Dunlap boasting of his relationship with Dent and claiming that Dent was his personal attorney. Dent, who left the White House staff in 1972, later served two years as lawyer for the National Association of Service Contractors, whose membership included most of the white firms operating minority fronts.

Harshman, who uncovered the first evidence about the front arrangements back in 1972, testified that he had great difficulty getting his superiors to look at his findings.

Harshman, who worked under Dunlap in the Office of Business Development, characterized Dunlap as 'unbelievable political' and said 'He seemed interested mainly in getting contracts out to minority firms in a way that would make the Republican Party look very minority - oriented.'

Cole, who preceded Dunlap as director of the Business Development Office, said he was forced out of the job temporarily to make room for Dunlap when he came to the Sba. Cole said he get the job back after complaining to a White House official who, Cole testified, told him that 'he checked it with Harry Dent.'

Dunlap then became his deputy, Cole said. But, he added, he found working with Dunlap 'intolerable' because of Dunlap's 'politizing' activities and finally accepted a transfer to Denver. Dunlap then took over as director of the 8(a) program.

Dunlap could not be reached yesterday for comment. However, Dent, in denying any involvement in the matter, said,'I don't know Mr. Cole, and I don't know that he pushed out of any job at my insistence.'

Dent characterized the testimony about hin as 'innuendoes' and a 'transgression against my name.' He insisted, 'I didn't have anything to do with the 8(a) program when I was in the White House: minority business enterprise wasn't my bag.'

As to his connections with the contractors association. Dent said that didn't begin until after he left government. He said: 'I didn't know any of these people previously. Even after they became my client. I didn't have anything to do with 8(a). They came to me for help in trying to get the government to put more business out on contract, and that's all I was involved with.'

Dent said Dunlap had been sent to him 'by someone whose name I forget' and admitted referring him to the SBA for a job interview. But he added: 'How he actually landed a job there I don't know : he certainly wasn't my man.'

Cole also told the subcommittee that political use of the 8(a) program fbecame 'feverish' during the 'political summer of 1972' when President Nixon was making his successful bid for re-election. He charged that SBA officials came under intense pressure to help the administration 'build up a track record as quickly as possible' among minorities.

From a previous policy of 'trying to make measured, steady progress.' Cole said, the emphasis shifted to giving out millions of dollars to black firms at a hectic pace. In one case, he said, SBA officials were given 48 hours to find a black firm that could be awarded a contract in Miami, Fla., so that Robert Kunzig, then head of the General Services Administration, could announce the award during a visit there.